Oil prices extended their gains for a second session on Tuesday after Opec decided to maintain its current output quotas at its weekend meeting in Vienna but left the door open for more supply cuts this year if the market remained weak.
Nymex April West Texas Intermediate rose $1.15 to $48.50 while ICE May Brent added 94 cents at $47.40 a barrel.
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April WTI is due to expire on Friday. Ahead of expiry in December, January and February, the front month contract came under substantial selling pressure and dropped below $40 a barrel level, mainly because of high levels of US crude stocks, particularly at Cushing, Oklahoma, the delivery point for WTI.
Analysts at Commerzbank highlighted an absence of selling pressure on the front-month WTI contract approaching expiry this month, suggesting the US inventory situation was gradually normalising as Opec supply cuts were tightening the market.
Analysts estimate Opec has achieved almost 80 per cent compliance with the supply cuts of 4.2m barrels a day that it has previously agreed.
However, this disguises relatively poor compliance with existing supply cuts by some Opec members, including Iran and Angola.
“The Saudis also appear reluctant to continue to do most of the work in cutting supplies, while other countries benefit from their efforts,” said Michael Wittner at Societe Generale: “Iran is in focus because it is by far the biggest quota buster, in absolute terms. Angola is important because it is a relatively new (Opec) member and has not yet demonstrated its willingness to sharply cut production, perhaps against the wishes of the Western oil companies that are its partners.”
Mr Wittner said Saudi Arabia’s spare production capacity (running at 2.9m barrels a day in February) ensured the kingdom had “massive leverage” over the global oil market.
Gold retreated to $915.90 a troy ounce, moving in a narrow range between a low of $913.10 and a high of $923.90, after ending trading in New York on Monday at $922.55. Sentiment towards gold has softened following recent gains for stock markets and an improvement in risk appetite.
